C. SHORT ANSWER. Answer the question completely but concisely on the separate answer sheet. 1. Discuss at least three reasons why stock buybacks are very popular. 2. Why are bonds payable the most popular way for large corporations to obtain large amounts of debt financing (more popular than notes payable)? 3. What is the significance of par value in stockholder's equity? 4. Why might a bond sell for a discount?
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- Which of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choiceTell whether the following statements describe the characteristics of stocks or bonds. e. Issues of a stake of ownership in a company. f. Investment that generally have higher reward. g. Debt that is made with an investors for cash exchange for interest. h. Investors can earn money if the security increases, but they can lose money if the security decreases. i. The seller agrees to pay interest on the loan at a fixed rate and schedule.4. How can we determine if the problem or scenario involves or illustrates stocks or bonds? 5. What possible problems or questions we may encounter when we are dealing with stocks? How about when we are dealing with bonds? 6. What factors have a great effect on the return of investment both on buying stocks or buying bonds?
- 1. Rank bonds, common stock, and preferred stock with regard to two factors the possibility of a substantial increase in value. Rank these same securities with regard to investors' legal claims for repayment on their investments. 2. Would a relatively high P/E ratio lead us to conclude that a stock is overvalued or undervalued? Why or why not? 3. Explain how a consumption tax could lead to a decrease in real interest rates. 4. List and discuss the various reasons that contributed to the financial crisis that occurred in 2008.6. Bonds and stocks are two financial products. Prepare a briefing note on these two financial products that are the core offerings of a financial market. Provide a comparison of these products. What characteristics of bonds and stocks explain the valuation strategy of each of these financial products? How will you adapt the growth stages model to value stocks (i) in the very long run; and (ii) for a company with no history of dividend payments. Prepare a briefing note for your brokerage.Why might a company choose to raise money through bonds, rather than take out a note payable or issue stock? What are the advantages and disadvantages of bonds? What does it mean to issue a bond at a "premium" or at a "discount"?
- 1.1 Why are stocks called "equities"? Are bonds also equities? 1.2 In what ways are dividends similar to coupons on bonds? In what ways are dividends different from coupons on bonds? 1.4 How do fluctuations in stock prices affect the economy? Use your own words and no plagiarism make it short and simple answer pleaseIf given the original value (par value) and market price (the price the bond sold for), how do youknow if the bond is being issued at a discount or a premium? 2. As an investor, would you want to buy a bond at a discount or premium? Explain the reasoningbehind your choice. 3. Explain how a company's Income Statement is affected by treasury stock transactions?Why would a company typically choose to source external financing by issuing bonds rather than stock? A. Bonds are simpler to issue. O B. Bonds have longer maturity dates than stock. O C. Companies pay taxes on the proceeds from stock issues. D. Bonds are a cheaper funding source.
- Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. a. Large payments of par value are made at maturity. b. Unlike equity, bonds do not affect ownership of a company. C. A business earns a lower return with the funds from the bond than it pays in interest. d. A business earns a higher return with the funds from the bond than it pays in interest. e. Requires payments of interest even when cash flows are low. f. Bond interest payments reduce total taxes paid.Determine if the following, if stocks or bonds 1. Its buyers receive return called dividend. a. Stocks b. Bonds 2. It is paid based on its redemption value. a. Stocks b. Bonds 3. It is said to be redeemed at par if face value equals redemption value a. Stocks b. Bonds 4. It is represented by a certificate which is proof of ownership. a. Stocks b. Bonds 5. It grants credit to a company. a. Stocks b. Bonds 6. It represents a claim on the company's assets and earnings. a. Stocks b. Bonds 7. Its buyers become lenders to the company. a. Stocks b. Bonds 8. It is a written contract between the borrower and the lender. a. Stocks b. Bonds 9. Some owners of it earn voting rights to some important company decisions. a. Stocks b. Bonds 10. Some owners of it earn voting rights to some important company decisions. a. Stocks b. BondsChoose the correct statement about different types of financial markets: a. Capital market is the market for short-term government and corporate debt securities b. None of these c. Money market is market for long-term financial instruments d. Stock market is the market where participants can issue and trade stocks